The Risks of Letting Your Legacy Ride: How Estate Planning Protects the Family

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Ask any successful family business leader “What is your most important accomplishment?”  The overwhelming response is: ‘my legacy’.  And yet, only one in six have an estate plan.  Why work so hard to build a legacy, but do nothing to protect it?    

“One of the most important things you should tackle right now,” advises Jim Rein, Next Gen advisor for Pinion, “is to ensure your family business goals are secured for the future. The one guarantee in this life, is there will come a day when you will no longer be in charge. How successfully you transition or transfer your business is highly dependent upon setting up an estate plan.”  

The fact is, less than 10% of family businesses successfully pass to the third generation. Studies show this is due to: inadequate estate planning, insufficient capitalization, and failure to prepare the next generation.

Considerations for Your Estate: How Operations Fail at Transitioning

Rein describes a common scenario he comes across – that many business owners are the unfortunate victims of thinking a will is enough to do the job of securing their legacy: 

During a tour of a family operation in the Midwest, a Pinion client pointed out a neighboring operation that was adjacent to theirs. He said, “You should have seen that place 10 years ago. It was beautiful…well run, well-maintained equipment, and just a really great operation.” 

He continued to share that the patriarch passed away and the operation fell into disarray, adding that the surviving family members were fighting over the estate.  “I heard he did some estate planning like a will or something, but it obviously wasn’t enough to keep the thing going the way he wanted…what a shame.” Then he added, “That’s why we’re taking this drive…I don’t want my operation to end up like that.”

5 Things an Estate Plan Will Do:

  1. Make your wishes clear and protected. Perhaps the greatest gift you can give yourself and your loved ones is peace of mind. Knowing your wishes are laid out in writing and supported by legal documentation ensures you are protected in your passing and provides clarity for your family. They won’t have to guess what you want.
  2. Minimize tax burden on beneficiaries. The government can currently tax up to 40% of an estate over $12.06 million. For farmers and ranchers with land, equipment and livestock, that is not a difficult number to hit. Too often, an ill-planned gift creates a tax bill that heirs can’t afford without selling part or all of the estate. A tax consultant can help navigate the gift and estate tax exemptions so that more of your assets pass to your loved ones.
  3. Protect family relations and minimize disputes. Money, business, and land are all deeply personal. It is an unkindness to leave important decisions to grieving family with differing opinions and desires. An estate plan minimizes room for strife, making it easier to process together rather than against each other.
  4. Plan for charitable giving. Whether you want to gift cash or specific assets, there are several charitable vehicles and tools you can use to make sure gifts are made according to your wishes and income and estate tax liability is minimized for recipients.     
  5. Protect family wealth and legacy. Without a proper estate plan, a probate court will most likely determine what happens to your assets. This can take months and years to settle, can be expensive to walk through, is a public process and gives family limited control. An estate plan ensures your assets, land, investments, retirement accounts – all of it lands in the right hands without a lengthy, public, and expensive probate. This is the best way to protect your family, your legacy and your life’s work.

“With so much at stake, it’s essential for U.S. farming and ranching families to chart a clear path forward. Deciding what to do with your assets and minimizing estate taxes will remain vital for protecting and preserving the generational wealth of family-owned farms and ranches,” Rein says.

Give yourself and your loved ones the peace of mind knowing your land, wealth and legacy are in good hands if something happens to you. Don’t pass the buck onto someone else, and especially not to Uncle Sam.

Unsure where to begin? 

Pinion Next Gen planning advisors help family businesses navigate the process — with a thoughtful approach to family, business, and legacy planning while maximizing your tax benefits.  

Reach out to a Pinion family business, estate and legacy planning expert below with questions — or to take the next step.



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